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OJAANK IAS ACADEMY

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OJAANK IAS ACADEMY

Are Freebies Commitments Financially Viable?

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A debate on freebies started after the Prime Minister’s critical comments on political parties promoting “Revdi culture”.
Recently, the Supreme Court also asked the central government whether it is economically viable to distribute irrational freebies during election campaigns.
What are freebies?
Freebies can be defined as something without any fee or cost. This is a very famous and widespread practice during elections. The freebies that are usually distributed include items such as bicycles, smart phones, TVs, laptops and discounts on bills (water, electricity, etc.).
Merit Goods Vs Public Goods
There is a need to differentiate between the concept of merit goods and public goods, on which the overall benefit of the expenditure outlay. Public goods are provided to the whole society. Merit goods are provided to the targeted persons. Hence there is an exclusion in the case of merit goods. On other goods, there is no exclusion under public goods.
Problem
Direct impact of fiscal health of the state: Any expenditure of the state has an impact on its financial health. So the concern about freebies is justified because these are expenses that do not positively affect production in the long run.
Is spending on education, health also a matter of concern?
Providing services like education, health and electricity to the underprivileged sections of the society cannot be considered free as they will have a favorable impact on economic development through positive externalities. Actually, it is the responsibility of the government to spend on these services.
Are freebies and subsidies needed for developing countries like India?
Despite the many influences on the financial management of the government, it becomes very important for developing countries to provide such subsidies and free incentives for various reasons-
(1)Food Security: Article 21 of the Constitution makes it mandatory for the government to implement schemes for subsidized food to ensure proper food security and the right to food as a fundamental right.
(2) Better Demographics: Ensuring nutritious food to citizens can create healthy and productive demographics and help in building human capital.
(3)SDG Goals: The Sustainable Development Goals aim at eradicating hunger (SDG-2) and good health and wellbeing (SDG-3), which can be achieved by subsidized food schemes in developing countries.
(4)Farmers Welfare: India is facing serious cases of farmers distress; To improve the condition of the rural economy, the government needs to ensure schemes and free facilities.
(5) Social Welfare and Security: The welfare principle of the state encourages the states to undertake such schemes to promote social welfare and reduce inequality in the society.
(6) Reducing social inequality: By providing food for all, social inequalities prevailing on various grounds can be reduced.
(7) Gender Equality (SDG-5): It becomes an imperative step for the government to take such steps to reduce gender inequality and provide a safe social status and recognize all genders and their sexual orientation.
(8) Stimulate demand: During the phase of recession and low demand, these subsidies and freebies can induce demand in the market which can bring growth to a certain level.
Is the government obliged to give free gifts? (state obligation) Although the government is not normally bound; It forms the basis of partnership with the local population and government. In India, every citizen has the divine right to have children and the government has an unlimited duty and responsibility to feed, educate and provide education, health and employment to every child.

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